What To Do With Extra Money In The Bank?

thank you for joining us America Michael is with us in New York hey Michael welcome to the Dave Ramsey show thanks for having me Dave appreciate you taking my call sure what's up all right I have $65,000 in the backend I don't know what to do with it is there something better I can invest it in rather than just sitting it in the bank with very little of any interest that's a really really good question you know what I have found over the years is what you're finding number one I don't get my money invested well if I don't have goals for it and it tends to get away from me you know just waters away just kind of drips away so we tell folks to always have an assignment a mission for every dollar the way we figure out how to do that is a system we developed years ago called the baby steps and depending on where you are in the baby steps is how I would utilize the money so the first baby step is a thousand dollars saved obviously you've done that baby step two is to become debt-free other than your home do you have any debt other than your home I have three months of car payments that's it and I'm done with that car it's a civic so it's what is the fact that is the balance on the car the payoff about three months five hundred forty dollars a month times three months so it's a little over fifty hundred dollars I would write a check today and pay that off that's the first thing I would do then that's baby step two baby step three is to have an emergency fund grandma's rainy day fund of three to six months of expenses now you obviously live on less than your income because you've saved money we know that so what is your household income though 92,000 okay and so if we said your expenses were five or six thousand dollars that you could survive on that a month if you had to in bad case three months would be your minimum eighteen thousand so I would put twenty to thirty thousand aside in a separate savings account that doesn't earn much interest but is accessible as insurance against life great grandma's rainy day fund you know what I'm talking about yeah you pick that number 20 to 30 minimum though somewhere in there you can go a little larger if you want but three to six months of expenses and you see how I did that I said six times three is 18 right yeah so I just made this up on the fly but you could you could get a little closer if you want I don't care and then the fourth baby step once we've done that and we still have approximately thirty-five thousand dollars left or thirty thousand dollars left give or take 30 to 35 after so far of your 65 that I've spent um or invested or given a name or an assignment then why we step four is putting fifteen percent of your household income away every year for retirement are you saving for retirement already investing for retirement already yeah I'm saying a lot I have about two hundred thousand retirement how much do you put in a year um every two weeks I put in 650 dollars and my employer matches approximately 225 for a total of 925 every two weeks I'm not counting your match you're at about 15% oh yeah you're right at it okay so we'll check that box and say that one's being done in your 401k and your match is in addition to that so you should be putting 15% somewhere around twelve or fourteen thousand dollars in in there and that's about what you're putting in twelve hundred dollars are you a month comes out about fourteen thousand a year so we're right there okay and so that one's done you have any children no I'm not married baby step five is to say four kids college that one doesn't apply check baby step six is pay off your house early you own a home yeah I am I kinda I was out three three years into my mortgage how much do you owe on it total I'm one hundred and thirty five thousand okay all right I would throw the other thirty or so we've got at that then after we've got the emergency fund in place and after the car is paid off and both of those things happen today in matter of fact all three checks could be written today and then what I would do is out of your budget any found money out of your budget and you're a good saver so this comes natural to you I would do a little calculation and say okay I got about a hundred left on my house how quick can I get this house paid off I mean you get that condo paid off in probably three four years the way you're going yeah I mean that'd be a really cool lot yeah hold our yeah forty-one yeah you'd be sitting at forty five years old say with a paid for condo and an emergency fund in place and already got at that point you'd have probably five hundred thousand saved in your in your 401k you're rocking man you're well on your way to being a millionaire thanks appreciate see that's how that's how that plan unfolds though and I just did it step by step by step all the way up the baby steps maybe step seven there's only one left and that's what the paid off property max out all retirement and investing and become outrageously generous with your giving and because the people I find that are the happiest that are wealthy are outrageously generous they don't give it all the way but they just make generosity one of the key things they program into their self and into who they are Michael thank you for listening ma'am I appreciate you calling in that's a good exercise for everybody to hear us go through hey guys thanks for watching if you enjoyed this video click the subscribe button to get the latest content and check out these other great clips from the show so you have to break the cycle you have to flip this thing on its head and make it behave you've got to get so fired up and wired up that you're broke friends think you've lost your mind you

Channel: The Ramsey Show - Highlights

Views: 2,102,092

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Id: 6DoGbBQ1Eao

Length: 6min 1sec (361 seconds)

Published: Wed Apr 13 2016